Oyola v. Midland Funding, LLC

UNITED STATES DISTRICT COURT

DISTRICT OF MASSACHUSETTS

_______________________________________

)

)

ABIGAIL OYOLA, on behalf of herself and )

all others similarly situated, ) C.A. No. 17-cv-40040-TSH

Plaintiff, )

v. )

)

)

MIDLAND FUNDING, LLC )

Defendant. )

______________________________________ )

DECISION AND ORDER ON DEFENDANTS MOTION

TO COMPEL ARBITRATION, DISMISS THE CASE,

AND STRIKE CLASS ALLEGATIONS

(Doc. No. 19)

February 27, 2018

HILLMAN, D.J.

Background

Abigail Oyola (“Plaintiff”) brought this action, on behalf of herself, and all others similarly

situated, against Midland Funding, LLC (“Defendant”) after the Defendant purchased an account

she opened with Credit One Bank (“Credit One”) in September 2014. She seeks damages for the

Defendant’s unlawful debt collection in violation of the Fair Debt Collection Practices Act, the

Massachusetts Debt Collections Practices Act, M.G.L. c. 93, § 24A(a), and the Massachusetts

Consumer Protection Act, M.G.L. c. 93A, § 2. Defendant subsequently filed the instant motion to

compel arbitration on an individual basis, strike the class allegations in the Complaint, and dismiss

the case.

Facts

On September 4, 2014, Plaintiff opened a Credit One credit card account (the “Account”).

The Vice President of Credit One and an authorized representative of MHC Receivables, LLC

(“MHC”), and FNBM, LLC (“FNBM”), Vicky Scott, states that after an account holder opens an

account, Credit One mails their credit card, enclosed with Credit One’s VISA/MASTERCARD

CARDHOLDER AGREEMENT, DISCLOSURE STATEMENT AND ARBITRATION

AGREEMENT (“Cardholder Agreement”). (Doc. No. 20-1 at 14-20). Plaintiff disputes ever

receiving the Cardholder Agreement but does not dispute activating the Account or using her credit

card. There is no credit card application or copy of the Cardholder Agreement with Plaintiff’s

signature in the record.

The Cardholder Agreement states that “[b]y requesting and receiving, signing or using your

Card, you agree” to the terms and conditions of the Cardholder Agreement. (Doc. No. 20-1 at 15).

Page six of the Cardholder Agreement states the following:

“ARBITRATION”:

PLEASE READ THIS PROVISION OF YOUR CARD AGREEMENT

CAREFULLY. IT PROVIDES THAT EITHER YOU OR WE CAN

REQUIRE THAT ANY CONTROVERSY OR DISPUTE BE RESOLVED

BY BINDING ARBITRATION. ARBITRATION REPLACES THE RIGHT

TO GO TO COURT, INCLUDING THE RIGHT TO A JURY AND THE

RIGHT TO PARTICIPATE IN A CLASS ACTION OR SIMILAR

PROCEEDING. IN ARBITRATION, A DISPUTE IS RESOLVED BY AN

ARBITRATOR INSTEAD OF A JUDGE OR JURY.

(the “Arbitration Agreement”). (Doc. No. 20-1 at 19). The Arbitration Agreement further explains

that claims “relating to your account” are subject to arbitration, including “the application,

enforceability or interpretation of this Agreement, including this arbitration provision.” (Doc. No.

20-1 at 15, 19). It also limits class actions or similar proceedings as it notes “Claims subject to

arbitration include Claims made as part of a class action or other representative action, and the

arbitration of such claims must proceed on an individual basis.” (Id. at 19).

On September 30, 2015, “Credit One sold, assigned and conveyed all rights, title, and

interest to a series of accounts, including the Account, to MHC Receivables, LLC.” (Doc. No. 20-

1 at 3, 6). MHC subsequently sold, assigned and conveyed all rights, title, and interest to the

Account to Sherman Originator III, LLC (“Sherman”). (Doc. No 20-1 at 3, 9). Plaintiff made a

final payment on the Account on January 26, 2015. On September 13, 2015, her card was charged

off with an outstanding balance of $600.36. On October 23, 2015, Sherman sold, assigned and

conveyed all rights, title, and interest to the Account to Defendant. (Doc. No. 20-2 at 3, 8). The

Cardholder Agreement states that it will continue to govern even if the “transfer or assignment of

your account, or any amount on your account, to any other person.” (Doc. No. 20-1 at 20).

Discussion

There is a strong federal policy in favor of the enforcement of valid arbitration agreements.

See CompuCredit Corp. v. Greenwood, 565 U.S. 95, 98 (2012). Pursuant to the Federal Arbitration

Act, an agreement to arbitrate is a matter of contract law and “shall be valid, irrevocable, and

enforceable.” 9 U.S.C. § 2. If a party challenges an arbitration agreement on “grounds as exist at

law or in equity for the revocation of any contract” the arbitration agreement may be found invalid.

Bekele v. Lyft, Inc., 199 F. Supp. 3d 284, 292 (D. Mass. 2016) (citing AT&T Mobility LLC v.

Concepcion, 563 U.S. 333, 339 (2011) (internal citations omitted)). It is the burden of the party

seeking to compel arbitration to prove that a valid agreement to arbitrate exists, the movant has a

right to enforce it, the other party is bound by it, and that the claim asserted falls within the scope

of the arbitration agreement. Bekele, 199 F. Supp. 3d at 293. In the event a valid arbitration

agreement does exist, the court shall promptly compel arbitration and either stay the action pending

arbitration or dismiss it. Id. (citing 9 U.S.C. §§ 3, 4).

Parties may “clearly and unmistakably agree” to submit threshold and gateway issues to

the arbitrator. Awuah v. Coverall North America, Inc., 554 F.3d 7, 10 (1st Cir. 2009) (citing

Howsam v. v. Dean Witter Reynolds, Inc., 537 U.S. 79, 83 (2002)). In the event a delegation clause

submitting gateway issues to arbitration is included in the agreement, such a dispute must be

submitted to the arbitrator, unless the party opposing arbitration challenges the arbitration

provision specifically. Id. (citing Buckeye Check Cashing v. Cardegna, 546 U.S. 440, 443–45

(2006) (if challenging the contract as a whole and not specifically the arbitration clause, the dispute

shall be submitted to the arbitrator).

The Delegation Clause

The Defendant argues that in compliance with the delegation clause stating that “Claims

subject to arbitration include…the application, enforceability or interpretation of this Agreement,

including the arbitration agreement,” this claim must be submitted to the arbitrator. (Doc. No. 20-

1 at 19). Plaintiff contends that no agreement to arbitrate exists because she never received notice

of and therefore never accepted an agreement to arbitrate. The Plaintiff focuses on the lack of

evidence that Plaintiff received the Cardholder Agreement to support this argument. She further

points to the fact that the delegation clause does not include the term “formation,” precluding her

challenge as to the formation of an agreement to arbitrate from the gateway issues in the delegation

clause. The United States Supreme Court has found that “a challenge to the validity of a contract

as a whole, and not specifically to the arbitration clause, must go to the arbitrator” because “an

arbitration provision is severable from the remainder of the contract.” Buckeye Check Cashing,

Inc. v. Cardegna, 546 U.S. 440, 445-49 (2006). Because the Plaintiff does not challenge the

formation of the Arbitration Agreement itself, but the receipt and formation of the Cardholder

Agreement, as a whole, the delegation clause referring all matters pertaining to the application,

interpretation and enforceability of the Cardholder Agreement must be submitted to the arbitrator.

See e.g., Spencer v. Midland Funding, No. 3:16-cv-00093-BR, 2016 WL 8677216, *3-4 (D. Or.

Oct. 21, 2016) (relying on Buckeye the court found that because the plaintiff challenged the card

agreement as a whole and not the arbitration agreement itself, “the validity of the Card Agreement

and the applicability and enforcement of the arbitration provision is an issue that is reserved for

the arbitrator.”). Subject to the delegation clause, the issues raised in the Plaintiff’s opposition

must be submitted to the arbitrator and not this Court. For this reason alone, the motion to compel

must be granted.

Valid Arbitration Agreement

Even if the delegation clause was not applicable, a valid agreement to arbitrate exists,

binding both parties. Here, the Plaintiff disputes the existence of an agreement to arbitrate. She

argues that she did not assent to the terms of the Cardholder Agreement because she never received

it. Plaintiff supports this assertion by arguing that there are no documents of express agreement

evidenced by her signature, initial, or electronic consent. Additionally, Plaintiff points to the fact

that the record does not contain a copy of the Cardholder Agreement addressed to her and argues

that Ms. Scott’s affidavit is insufficient to establish that the Cardholder Agreement was mailed to

her after opening the Account. I disagree.

Ms. Scott’s affidavit and attached exhibits establish that Credit One keeps business records

of credit card accounts originated by, or on behalf of, Credit One, MHC, and FNBM, in their

ordinary course of business, and that she is familiar with the account agreements.1 After review of

the business records pertaining to the Plaintiff’s Account, Ms. Scott determined that Plaintiff had

opened the Account on September 4, 2014, that a credit card and Cardholder Agreement governing

the Account were mailed to Plaintiff’s Worcester, MA address, and that Plaintiff had not opted out

of any terms or conditions of the Cardholder Agreement.2 Moreover, Plaintiff does not deny

activating her Account, receiving a card, or using it. The first paragraph of the Cardholder

agreement provides that “[b]y requesting, receiving, signing or using your Card, you agree as

follows…” and proceeds to list a number of terms and conditions. (Doc. No. 20-1 at 15).

Immediately following this statement, it states, “IMPORANT NOTICE: Please read the

Arbitration Agreement portion of this document for important information about your and our

legal rights under this Agreement.” Id; See Hays v. Jefferson Capital Systems, LLC, Case No. 15-

14025-GAO, 2017 WL 449590, *1 (D. Mass. February 2, 2017) (“The paper trail further shows

that the plaintiff activated and used his card, manifesting his receipt of the agreement and his assent

to its arbitration term”). While there is no evidence of an express agreement, I find that the record

is sufficient to establish a rebuttable presumption that Plaintiff was mailed the Cardholder

Agreement, which Plaintiff has failed to adequately rebut. See Hoefs, 365 F. Supp. 2d at 72-73

(“The “‘mailbox rule’ is ‘a settled feature of the federal common law’ and ‘provides that the proper

and timely mailing of a document raises a rebuttable presumption that the document has been

received by the addressee in the usual time.’”) (internal citations omitted).

1 Defendant, as Credit One’s assignee, may rely on Credit One’s business records to establish

these facts. See Hoefs v. CACV of Colorado, LLC, 365 F. Supp. 2d 69, 73-74 (D. Mass. 2005).

2 It is a regular business practice of Credit One to make a notation on an account holder’s records

and close the account if the account holder opts out of a specific term or condition of the

Cardholder Agreement. (Doc. No. 20-1 at p. 4). Plaintiff’s account did not have a notation and

was not closed, reflecting the fact that she did not opt out of any term or condition. Id.

Additionally, the Defendant has the authority to enforce the Arbitration Agreement.

Plaintiff argues that the Defendant does not have the authority to compel arbitration because the

Defendant is merely an assign and because the Defendant has failed to provide sufficient proof of

the assignment of rights and obligations pursuant to the Arbitration Agreement. The express

language of the Cardholder Agreement defines “‘we’, ‘us,’ ‘our,’ and ‘Credit One Bank’ [as]

‘Credit One Bank, N.A., its successors or assigns.’” (Doc. No. 20-1 at 15). It is clear from the

language of the Cardholder Agreement that “us” includes “assigns,” and therefore, as evidenced

by the Scott Affidavit, the Collins Declaration and the Bill of Sale and Assignments from Credit

One to Sherman and Sherman to Defendant, Defendant has the authority to enforce the Arbitration

Agreement as the current owner of the Account. See e.g., Harris v. Midland Credit Management,

Inc., No. 15-4453, 2016 WL 475349, *2 (D.N.J. February 8, 2016) (holding that because the

cardholder agreement “clearly defines Credit One to include its successors and assigns” and notes

that claims subject to the arbitration agreement “include not only Claims that relate directly to us,

a parent company, affiliated company, and any predecessors and successors” the defendant had

the right to enforce the arbitration agreement).3

Lastly, this action falls within the scope of the Arbitration Agreement. “[A]ll doubts are

resolved in favor of arbitration;…unless it may be said with positive assurance that the arbitration

clause is not susceptible of an interpretation that covers the asserted dispute.” IOM Corp. v. Brown

Forman Corp., 627 F.3d 440, 450 (1st Cir. 2010) (citing Mitsubishi Motors Corp. v. Soler Chrysler-

Plymouth, Inc., 723 F.2d 155, 159 (1st Cir. 1983)). The language of the Arbitration Agreement, as

discussed above, not only specifically includes claims involving “collection matters” “relating to”

3 The cardholder agreement and arbitration agreement in Harris are the exact same as the

Cardholder Agreement and Arbitration Agreement in the present case before this Court.

Plaintiff’s account but states that “[a]ny questions about what Claims are subject to arbitration

shall be resolved by interpreting this arbitration provision in the broadest way.” (Doc. No. 20-1:

p. 19). Because a reasonable interpretation of the Arbitration Agreement is that the unfair debt

collection practices of the Defendant involved the debt incurred on the Account, which Defendant

owns, the Plaintiff’s argument loses.

Conclusion

For the foregoing reasons, the Defendant’s motion to compel arbitration, dismiss the case,

and strike class allegations (Doc. No. 19) is granted. All additional issues raised by the Plaintiff

must be submitted to the arbitrator.

SO ORDERED.

/s/ Timothy S. Hillman

TIMOTHY S. HILLMAN

DISTRICT JUDGE